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Original poster

Any pitfalls to paying off mortgage ?

52 replies

fedup078 · 16/12/2021 18:07

I currently have enough money in savings to pay off the £70k I owe on the mortgage and have been hanging onto it due to redundancies where i work, they have finished the restructure and I'm safe for a while now
It's on a fixed rate of 1.8 and has a 2% early repayment fee until June when it drops to 1%
I should just pay it off now (or June) shouldn't I or is there anything I'm not thinking of?

OP posts:
Mosaic123 · 16/12/2021 18:24

Certainly not till June.

The economy is not great. I'd wait a year or two to see how we go with Covid.

It's very reassuring to have a good sum in the bank.

Avidreader12 · 16/12/2021 19:43

If you are not already paying more than the minimum monthly payment check now if you can make any regular overpayments without incurring the repayment penalty.

GreenLunchBox · 16/12/2021 19:46

So you would get fined £1400? Why would you think that's a good idea? Don't you trust yourself with the money?

ChocolateHelps · 16/12/2021 19:50

Can you do a bit of both?

Max out you ISA and possibly Max out your other halfs ISA and look at that accruing more in the next 3-5 years than it will cost in interest

Can you pay 10% off mortgage without penalty? Do that this year and next year

Do you have emergency savings of 3-6 months of expenses in a short term account or premium bonds?

Can you top up your pension? You'll get 25% straight away. You can take a 25% tax free lump sum when you reach pension age, can that pot grow faster than you mortgage interest rate?

Have a read on Facebook Meaningful Money or the same name has a podcast and a book

Kshhuxnxk · 16/12/2021 19:53

Best thing every was paying off my mortgage. I would even pay the early repayment fee to get it away. Go for it!

BotterMon · 16/12/2021 19:58

Change the term down and overpay each month. So if you have 10 years left, change to 1 or 2 years and pay it off that way and you'll avoid early repayment fees.

GirlOfTudor · 16/12/2021 19:58

I'd personally go for it and pay it off whilst you can. That cash will devalue over time. If you do get made redundant in the future, you'll sleep easier knowing that you don't have a mortgage to pay, or the risk of increasing interest rates.

Original poster
fedup078 · 16/12/2021 20:03

@GreenLunchBox I'd be paying a hell of a lot more than in interest

OP posts:
Original poster
fedup078 · 16/12/2021 20:11

@GirlOfTudor this is what I'm thinking
No matter how you look at it I owe that money back to the bank and the money isn't currently doing much split between Premium Bonds and s&s
I think the interest rates will be much higher next time I need to fix a rate
I've already over paid the maximum

OP posts:
Mia85 · 16/12/2021 20:14

How long is your fixed rate for and can you make overpayments without incurring a penalty?

We're also in the position of being able to pay the mortgage off and wondering whether to do so. Of course the main 'pitfall' is the opportunity cost of getting a much better return on your money elsewhere. With inflation so high and interest rates (still) so low effictively your debt is reducing every year. But I appreciate the piece of mind argument and that cutting out the cost of repayments from the monthly budget is attractive when everything else is going up.

Mia85 · 16/12/2021 20:16

Sorry cross post. Is your S&S really not doing much? Returns have been incredible recently (though for how long...)

Original poster
fedup078 · 16/12/2021 20:18

@Mia85
It would be nice to have that extra money monthly
I'm on a really low wage and I'm finding I'm taking money out of the savings each month
I really don't want to flit it away on petrol etc
I'd still have a few k left over if I paid it off in full

OP posts:
Original poster
fedup078 · 16/12/2021 20:19

@Mia85 I'm not sure I dare risk it in s&s so only have about 7k of it on there

I think I'll pay it off in June

OP posts:
Mia85 · 16/12/2021 20:26

I can completely understand why you'd want to pay it off. Even though you can run spreadsheets showing you'd be better off if you kept it and invested the money instead, there's loads of piece of mind from having it gone and one less bill to worry about. It'll give you more space in your budget not to worry about the rising cost of living too. At least that's the way I am thinking just now. One thing I am going to explore (I am also waiting till June as we can pay it off penalty free then) is whether I can get an offset mortgage and keep it fully offset so that I've effectively paid off the mortgage but got an big 'emergency fund' if I need it.

Svalberg · 16/12/2021 20:46

I'd ask the bank if you can make a regular overpayment without incurring the early redemption charge. Barclays allow me to pay the monthly contracted payment plus 3 times that, each month, plus the 10%, without penalty. They keep very quiet about it though.

Original poster
fedup078 · 16/12/2021 20:51

@Svalberg I've already overpaid the maximum for this year

OP posts:
ZenNudist · 16/12/2021 20:51

I'm annoyed we paid off our mortgage. We should have bought another house in our area and doubled our money. Ah well. Its done. I don't save as much as id like now.

Mia85 · 16/12/2021 20:57

@ZenNudist

I'm annoyed we paid off our mortgage. We should have bought another house in our area and doubled our money. Ah well. Its done. I don't save as much as id like now.
Do you mean move to a more expensive house or BTL?

It sounds as if the OP could do with reducing costs rather than taking on a more expensive home at the moment.

Svalberg · 16/12/2021 21:01

[quote fedup078]@Svalberg I've already overpaid the maximum for this year [/quote]
So have I. But I'm still allowed to make overpayments of £1500 per month, as my contracted repayment is £500 per month. If you're with Barclays, that's what you're allowed to do.

Original poster
fedup078 · 16/12/2021 21:03

@Svalberg anything I pay now over the contracted amount would be subject the the early repayment fees

OP posts:
HandlebarLadyTash · 16/12/2021 21:07

I would invest in private pension a chunk this yr( & if need another chunk after April 2022)
I would put some in the mortgage & some in a S&S isa so I could get hold of it if needed
The balance is, Mortgage interest rates are looking at increasing BUT the longer the cash is in the private pension the better the outcome.

Svalberg · 16/12/2021 21:12

[quote fedup078]@Svalberg anything I pay now over the contracted amount would be subject the the early repayment fees [/quote]
Ok, if that's the way your bank does it, I was just saying what Barclays allow.

PiffleWiffleWoozle · 16/12/2021 21:16

Do you have an emergency fund? 3-6 months of expenses in cash or premium bonds, easy access?

If not I would save that up first and then pay off.

Taswama · 16/12/2021 21:24

I would look at getting an offset mortgage in June, then move your savings to the linked account.
Having a lump sum like that available could be very useful in future.
Don't get rid of all your savings and leave yourself without a safety net.

hereswhatIthink · 16/12/2021 21:27

I would pay it off, as owning your own property 100% gives a wonderful sense of security and peace of mind.

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